Funding Priorities

South Dakota Democrats say a law passed by the legislature pits economic development against education funding.

House Bill 1230 would set up a large project development fund to bring more business to the state. Democrats say an effort to refer the law to the 2012 ballot is a fight over funding priorities, while supporters of the measure say party leaders are misguided.

But, more than 300 people are circulating the petitions to let voters decide if a large project development fund passed this past legislative session is the right way to spend taxpayer money.

"We felt that the people of South Dakota probably would like to have a say in how we spend our money, and that this was a very good way to put it in front of them and say, 'Is this the best use of the limited resources we have in this state?" South Dakota Democratic Party Chairman Ben Nesselhuf said.

The law would set aside 22 percent of the revenues from the contractor's excise tax the state collects and give grants and incentives to companies looking to locate in South Dakota. Estimates show it would amount to about $16 million a year.

"We thought we were pretty well poised to try and create jobs," Steve Willard, the executive director of the South Dakota Electric Utility Companies, said.

Supporters of the law, like Willard, say it's especially important to have this fund during an economic downturn.

"You've got businesses trying to figure out what to do in Illinois, what to do in California; you're trying to figure out what to do in Arizona and so it's the perfect time for us to be competitive," Willard said.

Despite the potential that the new fund will bring new companies to South Dakota, no Democrats voted for the bill, including Sioux Falls Senator Angie Buhl.

"I thought it was not a good use of our money and a misplacement of our priorities, frankly," Buhl said.

Democratic leaders say they aren't opposed to economic development but they are opposed to taking money out of the contractor's excise tax, money that ultimately is taken out of the state's general fund. They argue it's money that could go to struggling schools or hurting healthcare providers that suffered cuts during the last legislative session.

"At the same time while they were doing that, they were creating a new fund. Taking money out of the general fund, a new corporate slush fund, up to $16 million a year. To do that at a time when we're making massive cuts to our constitutionally obligated programs like education and Medicare," Nesselhuf said.

"I don't think you should let Ben Nesselhuf decide that the business community and education community don't get along because we do," Willard said.

Supporters of the bill say the fund will help generate new business and new construction and ultimately bring in more dollars, which means the amount that goes into the general fund won't take a big hit.

"In theory, the large projects are going to drive an awful lot of that contractor's excise tax, so it makes it essentially self-funding," Willard said.

Willard says when more companies come to the state, it will also bring in more taxes that can go to education.

"If that fund just piles up, then it means congratulations; we're delivering a lot of growth. Well that's going to bring jobs. That's going to bring sales tax. That's going to bring property tax and those are all things that lend itself to education down the road, so it just seems short-sided," Willard said.

Buhl says the decision comes down to the public's funding priorities and that's why Democrats are trying to get 16,000 signatures to put this issue on the ballot.

"I think that folks are really receptive to the idea that we should fund education and Medicaid first before we start looking at handouts to corporations," Buhl said.

But Willard says this is nothing but a partisan issue that is aimed at dividing the business community in South Dakota and the state's school districts.

"This is essentially a Democrat fight that pits the two against each other," Willard said.

It could soon be up to South Dakota voters to decide which side they agree with.

The large project fund won't be set up until January 1, 2013, so getting the issue on the 2012 ballot will not have an affect on starting up the program.